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- [00:01]
A
All right, welcome back to Real Estate Without Borders. Dave and I are actually sitting together, which is funny. It's super weird. And we're at the office. We got our Valerie hats on. But anyway, so today we're joined by somebody I've known for a really long time. We've known each other since high school.
- [00:14]
B
Really?
- [00:14]
A
Yeah, yeah. And you and I have connected. You know, like, I've been super interested in investing in real estate in Africa because, I mean, one of the big things that's compelling about real estate is, like, you can ride these big demographic waves. Right. And the only place where we're seeing a demographic wave that is positive in the world right now is Africa. Right. Like, it's quite literally the only place on earth that is above the replacement rate. From on a continental perspective, every other nation on earth pretty much is below the replacement rate. We've talked about the rate in a couple of times in the show, so I won't belabor what that is. But, Adam, you're kind of an expert in real estate in Africa. You've developed in a number of different countries, invested in a number of different countries. Let's get started. Can you just, like, first off, introduce yourself for the audience, what you do, and then tell me a little bit about, like, from 30,000ft, what the real estate situation looks like in Africa.
- [01:09]
C
Awesome. Yeah, no, thanks, Dave. Thanks, Dan. So, yeah, great to be on here. Super excited to chat. And, yeah, as you said, this is the most exciting place to invest in real estate in the whole world.
- [01:19]
D
Right.
- [01:20]
C
The demographic changes, the future is truly African, and it's happening right now. And so whoever can figure that out and make money from that, I think is going to be in a pretty good position for the next few decades. So, yeah. Adam Cannon. Zulli. Originally from rural Ontario, but European roots, and I've been here about 15 years. I first went to the Schulich School of Business, where I did an undergraduate in international business. And then right after that, I went to Tanzania, where I worked for a Canadian charity and learned Swahili. You know, kind of understood the market. And, yeah, then went back to Canada. I did banking, did my cfa. I've now got my Kaya, which has been alternative investments, and then also my CBV and business valuation. And so, you know, did banking for a bit, and, you know, I had to come back, so I quit my job and I took my life savings and I moved back to Tanzania where I started the solar company. And so I did that for a few years. We raised a bit of money. We got a patent, and then we were able to manufacture about 8,000 little hockey puck solar lanterns and distribute those to folks off the grid up in Tanzania and went back to Canada. I did some young diplomatic work with the young diplomats of Canada. I did the G20 Young Entrepreneur Summits across China, Japan, and Germany, and then worked my way back to Africa to do consulting work, and mostly in finance. And so I spent some time in Europe as well, doing CFO consulting and financial consulting, modeling and things like that. So that was my route to get back onto the continent. And I was doing that first, you know, between Malawi and Kenya. And then obviously, when Covid happened, I just kind of happened to be in Kenya. And so I started doing CFO consulting, but in real estate. And it was always interesting for me because when I was doing my solar company in Tanzania, I saw people were, you know, I know I wasn't making any money, you know, doing solar lanterns, but the people that were making money were doing real estate. And whether that was, you know, just buying land and selling it, that was operating. That was construction, that was tourism. People were making money in real estate. And so after I did a bit more research and talked to more people, and after, you know, really just kind of digging in to see who was making money and why, I decided, yeah, to take the leap and go to Malawi and do some real estate there. And so, yeah, I've been here ever since between Malawi and Kenya, and most recently, I've been doing CFO consulting. And so I was the CFO for a distribution company called Kasha Canadian, founded as well, but operating across Africa now, I think in maybe 10 countries or so. But when I was there, it was about three. And then we expanded. So, yeah, we raised, you know, about $20 million US which is a big deal right, over in Africa for these types of startups, and then scaled across the. Across the continent. So that's the most recent thing. And then, yeah, now it's been a lot of fractional CFO financial modeling. And then we're also working on a project in Malawi for real estate, so to do affordable housing as well in there. In Malawi.
- [04:33]
B
Hold on. You got to spell. I'm a big geography guy. We got to spell Malawi for me so I can find this on the maps.
- [04:40]
C
So it's M A L.
- [04:43]
A
This is. Most of this podcast is just geography lessons with Dave.
- [04:47]
B
I'm so fired up this episode. Like, I. You got me. I'm hooked. The hook was, wow, okay, so you're in. You're like, right, okay, right. By Tanzania. Crazy. This is super cool. This is a basic question, is it super hot there?
- [05:03]
C
So right now it's quite cold in Kenya at the moment. I'm in Nairobi at the moment and so it's about one and a half thousand meters high. So it's a bit chilly. And it's around the colder time of the year right now. Around Christmas, it gets quite hot. Malawi is a bit hotter in the long way where I stay. So it's a bit, you know, a bit hotter over there, but currently pretty cold.
- [05:28]
B
Crazy. Okay, so you're, you're, you're building down that you're building affordable housing. Housing and selling real estate.
- [05:35]
C
Yeah, that's the idea we just started and really trying to get it off the ground. It's been a pretty difficult economic situation in Malawi. So it's, it's good that I can go back and forth between Kenya and Malawi. And so when I originally started, it was around 2019 in Malawi. And yeah, at the time it was pretty promising. Before COVID you know, there was just this election that, you know, the court overturned the results because there was some funny business. And so it was a really positive story. And so that's, it's been economically very difficult, lack of foreign exchange. And so, you know, I've pivoted back and forth from Malawi to Kenya. So we're just starting out, just kind of getting, you know, getting things going. But we've already secured the Malawian government's consent to start this project with the Investment and Trade Center. So we've had to prove to the government that we're serious investors. We've got a minimum threshold of money that we've already invested, we've, you know, begun operations, we're paying taxes, things like that. But we haven't yet started the actual project. We're trying to get a bit more funding and then we can, we can. Yeah. So it's been quite difficult the last few years with foreign investments in Malawi, especially around real estate. And so that's really put the whole industry on hold. Unfortunately, recently the government has passed legislation that allows sectional title, which unlocks a bit of investments and it makes it a bit more dynamic. But the idea is to sell to local Malawians that need housing and that can, can pay for it. We're looking at building houses for as little as $10,000, $20,000, and then, and then partnering with banks to do mortgages, which I know sounds pretty straightforward, but that's pretty innovative. Right, and how we're looking at it.
- [07:22]
A
Yeah, like this is Like, I mean it's really worth thinking about. Like this is what an emerging market looks like. Like they don't have the thing like all of those like infrastructures that we take for granted in other places like the US and Canada don't exist there. So like, like you said, like you're going to be building housing, you can do it obviously at a fraction of the cost if you can do it anywhere else because there's cheaper labor, likely cheaper materials and then you can deliver end units. But they don't even have like you and I have discussed as a handful of times that even we're looking at potentially like, you know, decentralized finance solutions for like creating a lending environment there, which is like, and you see this a lot in like in Mexico there's less like banks like Dave does a lot of investments in Mexico, but emerging markets, like they don't even have, you know, like they don't have mortgages that can be registered on title. They don't have, you know, lot of these things. Like can you explain that that a little bit to me, like what that whole environment looks like in, in Africa as a whole, but also in Malawi where you're developing for sure.
- [08:15]
C
So every country, you know there, and there are 54 across the continent, each one is a bit different, whether French, English, Portuguese, whatever. And the laws are quite different as well. So luckily in the English speaking part the basis is on common law, which makes it a bit easier know for us as Canadians. And so the issue though is that the institutions in general are not as robust and you know, deep rooted as the Canadian or American systems, which means mortgages, titles, you know, the, the credit system is not, in a lot of ways it's not operating for you. And so with these weak institutions, what you have to do is find alternatives to reduce the risk. So what, you know what, what we're doing is like going through the local leadership, which is the chiefs and traditional authorities to build that trust to figure out who actually the owners are. And so you have a lot of land that isn't titled, so what do you do? Right, there's no registry. But what you have to do is you've got to go and meet the chief, talk to the chief, talk to the sub chief, talk to the villagers, talk to the people in the community and figure out who is actually the owner.
- [09:25]
B
And then we have a problem.
- [09:27]
C
You basically have to. So what we've done sounds funny but we probably developed the best genealogical mapping in a lot of cases because we have the family trees that Go up here and there, the kids, the relationships, the uncles, the aunts, grandparents, the kids, the chiefs, IDs, names, everything. We've mapped out to such a degree that we know who the owner was here, who the owner was there, and we can track it through time so that when somebody says, oh no, this is mine, what we say, well, okay, so who are you? Are you this uncle here? Because what we also do is we do several layers of affidavits to make sure that all the different family members can't then come back to say, I didn't know about this sale. So we basically go to the nth degree to ensure, because of the weakness of the institutions, to ensure that the certainty is there and that we can reduce our risk.
- [10:20]
A
What's like, is there a willingness to like, create these like centralized land registry systems and stuff like in. Or they kind of, they really want to stay with sort of like the old school way of doing things. Like what? Because you would think, like, you know, the cool part about emerging markets is like, what took, you know, like the US or the, the British Empire, like hundreds or thousands of years to do, because there was so little technology back then could now, and there was no real examples. Like, they were kind of just theorizing these things. Now you have like, you could go and say, hey, look, here's a land registry system in Canada. You know, you guys could just take this and put it on, on your country. Is there a willingness, like, is there a progression towards that? Or is it kind of like, does it rely on private sector individuals like yourself who have, you know, their own outcome in mind to do, to create? Like, basically it sounds like, you know, to be an investor there at scale, like the scale that you want to do, you almost have to build your own land registry system. Is there. Is the public sector making an effort to do it as well or not really, like, I guess under. Probably underfunded under Resourced a little bit, right?
- [11:23]
C
Yeah, definitely, you know, underfunded under Resourced. And there are like bigger economic institutions. Maybe it's the World bank or the IOC or the imf, I can't really remember, but that is coming in with these types of initiatives to build out these registries, which is great. And I think the economic value from an infrastructure perspective, it'll just promote investment like crazy. Like there's, there's, there's really no other system that will catalyze growth and economic development like property rights. There's nothing else. Right. There's absolutely no other fundamental factor when it comes to Building an economy. And so property rights and then the court system that can sort out disputes. So there is willingness. But also in some jurisdictions the entrenched elites are benefiting from the opacity of these registrars because they can own a lot of properties without anybody knowing about it. And they can also transact with these properties in a way that is a quid pro quo for a lot of different political shenanigans. So there's the willingness and the actual people on the ground, they're there, they need, they want this so bad. And so the reason that we're able, we think, to get a premium in the market is because of the certainty of title. So that we say we're selling this. Come at me. There's no way that you could ever dispute this unless it were a government top down shakedown, right.
- [12:47]
A
So apart from that. So like the innovation almost is like you're selling a different product. Like, you know, where, where like everybody else in the market, in the resale market is kind of selling this like very traditional, like, like you said, like the family tree. And you have to go through all the different things to say, yeah, I own this, this piece of real estate you would actually be selling like because you've taken a piece of land and you've taken possession of it through the proper channels and, and infrastructure that you've created and then you subdivide it and actually create lot lines and all these things. Like you're, you're quite literally selling a product that maybe didn't even exist before you created it.
- [13:20]
C
Yeah, totally. In a lot of cases, like in Canada, obviously we have the municipality that will come in and do the water and the power and whatever, whatever. So a lot of cases here people will do that themselves. So you have a development and security as well, fencing and so you have to basically build a condo corp, but for a whole development, because you're the one building, you're doing a borehole, you're putting in a water system, you're doing sewage, you're doing solar on every house. And so all that costs money and there's a maintenance factor. So it's hard, right? And people don't want to pay. You know, there's a development here, right, just down the road and it's, you know, million, $2 million houses inside these beautiful gated developments. And they're not paying like people are not paying their dues to pay for the security guards and all that kind of stuff. So it's like, or garbage removal or whatever. So you know, it's the tragedy, to be honest.
- [14:13]
B
Same thing happens in Mexico because the developers are the same thing in Mexico. They're the ones in charge of doing all the infrastructure, all the water systems, all the electrical, and there's a few projects where, for example, it'll be multiple developers inside one gated community. And then they kind of lost touch with who's paying who, and now it's just a big disaster.
- [14:30]
C
Yeah, it's a mess. Right. And so you have to set up these. These entities now, Right. While you do the developments and then have a governance structure, which is hard. And it's. People don't do that because it takes time and money. People just want to buy land, subdivide it illegally, not worry about any type of infrastructure and sell it on and then exit. And financially that's probably the best routes.
- [14:54]
D
Right.
- [14:54]
C
If you don't care about taxes or anything like that. But it's the, the lemon theory, so, like the, the market for lemons. So people that are buying those properties assume that all properties are like that. And so they're not willing, in a lot of cases to pay for the alternative. That is legally done, you know, properly, you know, segmented and everything.
- [15:16]
A
What, like, what would. What needs to happen for that to change is like just. You get a new generation and it's kind of like one of those turnings that happens as you, like, as power shifts from, like, the old guard to the new, like kind of young blood. Is that, like, it's just something that takes time and then you're sort of buying, like, you're buying this transition.
- [15:34]
C
Yeah, good question. So I think in general, like, the big thesis that we've got is that institutions improve and they're getting better every single year.
- [15:42]
D
Right.
- [15:43]
C
You saw like 2019, 2020, the election that was overturned.
- [15:47]
D
Right.
- [15:47]
C
You know, in a way that the courts determines the outcome and, you know, democracy won. And so you saw that as like a big stepping stone to the next, you know, instance where maybe there's a big land grab or whatever and the government is checked again with the court, or like the people are going to prison for corruption. And so it sends a signal to the overall market and to the, to the people that institutions are trustworthy. And that's the thesis that every year it gets better and better and better while people get richer, they demand more from their governments. You're seeing a lot of movements across the continent whereby young people are coming up and saying, I don't like, you know, all of my tax money going to, you know, your land Rovers. I wanted to go to schools and I wanted to go to. Hey, you joke, but it, like, there's a lot of leakage still in a lot of these countries.
- [16:39]
A
I think that's everywhere, right?
- [16:41]
C
It's everywhere. Right. So like. But in. But in Canada, like we can check that pretty quickly. And it's so transparent that. And now with AI, you can really figure out who's taking money.
- [16:52]
D
Right.
- [16:53]
C
If they are, and then crack it down and there's a process to get them out. Like, it's very, you know, slick, but here it's a bit more nuanced.
- [17:02]
B
Is this a common practice? Like, you're seeing more and more developer, like developers like yourself or coming from Canada, us doing types of projects like this in Africa. Is it becoming more prominent?
- [17:14]
C
Yeah, there's a lot of interest, obviously, because of this big economic opportunity and the demographic boom that we're seeing. And so it's not just the population growth rate, which is, which is massive. It's also the urbanization. So people from rural communities are coming to the cities. And so it's kind of like what we saw in Canada maybe.
- [17:33]
A
I think the entire world's urban. Can you. You gave me like a stat on like what li long way is like supposed to grow to. Can you tell me? Yeah, because like, just to the context of this is crazy.
- [17:42]
C
Yeah. So it's amazing, right? So Lilongwe, the capital city of Malawi, which I'm sure many people in Canada have not heard of, it comes. There's about, you know, let's say one and a half, 2 million people wanted to like the GTA, right. The bigger, broader city is projected to be the 13th biggest city in the entire world in about 70 to 80 years. Yeah, exactly. People in Canada have never heard of is going to be one of the mega cities of the future. And so if you can be a part of that growth story, that is the economic and demographic dividend that we wished we were a part of.
- [18:24]
D
Right.
- [18:25]
C
In Canada in the 80s and 90s.
- [18:28]
B
What is the opportunity for people? Because this is new to me. Like, I'm a pure outsider here to this. This is all brand new to me and super exciting. What is that economic opportunity for people?
- [18:40]
C
Yeah, and it's. That's a question that we're all trying to figure out the answer so I.
- [18:45]
B
Can do it myself.
- [18:47]
C
So actually I met last week with the Minister of Natural Resources of Malawi at the UN Habitat conference here in Kenya, and we were chatting about that exact question. So what is it that is going to drive economic Growth, provide jobs. And I think it's a combination of factors which is like a lot of investment, a lot of FDI.
- [19:06]
D
Right.
- [19:07]
C
So in Canada, what are we getting? 5, 10, 15? Like you can get 50% IRR or more in developing markets if you calibrate your risk and you figure out how to do it. Okay, so that's one. And I think it's, you know, so it's fdi, it's like investments, it's you know, bringing in good institutions and like good economic frameworks. So in Malawi, there's the Malawi Investment and Trade center which is set up as a one stop shop to open up your business. So that's what we did. And so to get my personal work permit for me in Malawi, you know, go through this center business plan and you go through and I get everything stamped and done properly one place. So making it easier and easier to do business. And then finally I think it's like the broader education and the, the productivity of, of the average workforce. So yeah, just to give you an idea, it's about 130, 000 Malawi Kwacha, you know, per month is as the minimum wage. And so in market rates, that's let's say 40, $50 or so, right? It's around that range per month. And so people, that's, that's. Yeah, yeah. So a lot of people aren't getting that, right, they're getting below that. And the key is well how do you build an economy like with that? And so you have advantages, right? You have you know, manufacturing where you can get, that's labor intensive and so building exports, agricultural exports and things like that. So marijuana, cannabis is becoming a big industry in Malawi as well. And that's also, you know, a potential route. But it's kind of like the problem of exactly as you said Dave, like where all the jobs, where's the economic growth it's due to you know, this population boom. How do you have everyone housed and fed? So it's a lot of it just.
- [21:13]
A
Comes from just like growth of the, of the domestic population. You have to build, you have to feed them, you have to house them, you have to do all these things, educate them. It's, etc, those are all things that produce within what is the current like base of the economy. Like what's the most productive industry in Malawi right now?
- [21:29]
C
So it's agriculture. Agriculture is the real economic driver. And so what's interesting about agriculture. So I'm also doing farming. You know, we're doing maize, soya, we had chickens, cows, Pigs. I'm a horrible farmer. Like, I really don't know what I'm doing. Right. But it's fun. And I like to hang out with cows.
- [21:47]
A
Connected because I like, I farmland. Like, it's like my favorite asset class.
- [21:52]
C
It's just the best. It's just so much fun and. But you know, I was able to add like inoculants to my soya, for example, and I didn't even know about this, but it's this like, you know, thing that you put on your, your seeds as you plant them that drastically improves the yields. Right. And absorption of nutrients and whatever. So by doing that, you can basically 2x the GDP of the entire country.
- [22:18]
D
Right.
- [22:18]
C
So little things like that, by adding better organic fertilizer or like permaculture, all these different things, you can really drive productivity. And so I think that's the play, man.
- [22:29]
A
I know we, we try and keep these short, but I wanted to invite you back like, because I think it would be awesome to like maybe touch base on like a monthly or, you know, every other month just to like get an update on like what's happening with your project and like the market there and whatever. But in regards to like your project and like, if somebody wanted to just invest in like Malawi or your deal or whatever, whatever, like, what would you, what would be the advice that you would give to an investor who just wanted to like, get into that market? What was, what's the easiest way for someone to do that? And like, where can they reach you if they want to?
- [22:59]
C
Yeah, so they can reach out on LinkedIn or we've got a website, Yumba. So N Y U M B A which means house in Chichewa and also Swahili. So investing, you know, even with all these trade barriers being reduced, it's still tough. It's very, very tough. And so, so we've set it up with the Canadian whole to go and then Malawian OPCO and then running everything through that. So very, very clean, very easy. In Ontario, people do want to invest. It's a pretty easy, low risk, good jurisdiction for Canadians anyway, and that's what I would recommend. So there are plenty of opportunities. There's a lot of scope. We're just starting and. Yeah, happy to chat. And even if it's just a chat and I can help them find something else. Great, because we need to get a lot more in Canadians here on the continent investing.
- [23:45]
A
Well, it sounds like it's not the kind of place that you want to go and like directly invest in real estate. Like, it sounds like there's a lot of issues that could arise from that. Like you just get cut, family tree, land registry system or whatever. So. So it's cool that you're kind of like building the private sector infrastructure to make it possible for people to invest.
- [24:02]
B
I could be the listing agent for sure.
- [24:03]
A
There you go.
- [24:05]
C
Exactly. And. And then in the medium term, what we're looking at doing is luxury housing for a lot of tourists that want to come to Malawi. Malawi is one of the most beautiful countries in the world. People are the nicest in the world. And as a Canadian, obviously, that's. That's quite a lot to say. And I think the tourism will become a lot more popular. And as people come, we want to basically build, you know, a really nice experience for people when they come to Malawi because it's. You've got safaris, you've got a big lake. It's quite a lot. So that's like the five year plan is to do luxury, luxury housing as well, just outside the city.
- [24:45]
A
Amazing. Well, we'll have to come visit you when it's done.
- [24:49]
C
Anytime.
- [24:49]
A
Appreciate your time and look forward to having you back on. I wish we could have done this one longer, but there's a couple of scheduling conflicts on our end. I apologize, but. But yeah, we'll look forward to anybody listening, get in touch with Adam and look forward to having him back on the show within the next couple of months for sure.
- [25:03]
C
Awesome. Thanks, gents.
- [25:05]
A
Thanks, brother.
- [25:06]
B
Thank you.
- [25:06]
C
Thanks. Thanks. Bye. Bye.